The decision in Lambert Leasing v QBE Insurance (Aust) Ltd  NSWCA 254 is one which has had a great impact on a variety of issues relating to dual insurance, including how “other insurance” provisions in policies are to be applied.
Lambert Leasing involved the sale of an aircraft, which in turn was leased to a third party. The aircraft subsequently crashed with the loss of all passengers and crew. Proceedings to claim compensation were commenced by the relatives of those who perished in the crash. In relation to the claims, the interaction between two available policies of insurance taken out by parties in that chain was considered. Both policies contained “other insurance” clauses which sought to avoid liability in circumstances where there was another policy which would respond to the claim. Neither clause offended section 45 of the Insurance Contracts Act 1984, as the claim on the policies was made by Lambert Leasing, which, although an insured under both policies, had not effected either policy. It was not the primary insured but was named or described in each policy as an eligible beneficiary.
For unrelated reasons, the decision in Lambert Leasing did not result in a contribution to the claim by each of the insurers. However, by way of broader observation, the NSW Court of Appeal determined that in situations like these, the “other insurance” clauses effectively cancelled each other out, so that the usual principles of dual insurance would apply and both insurers would ordinarily be called on to respond to the claim.
Impact of the decision
What practical impact does this decision have? In matters like these, it is important to make the distinction between:
- Whether an insured has effected either, both, or none of the insurance policies against which it might be entitled to claim; and
- To carefully consider how this status of the insured impacts on any clauses that seek to limit or exclude the liability of the insurer.
If an insured did not effect either of the insurance policies against which it could bring a claim, section 45 would not apply. However “other insurance” clauses would cancel one another out and a dual insurance position would arise.
If the insured had effected both policies, then subject to the carve outs in section 45, the effect of the “other insurance” clauses would be voided in both, and again, dual insurance would exist.
Finally, if only one of the policies was effected by the insured, then its “other insurance” clause might take effect. However the similar clause in the policy not effected by the insured would be voided, such that this policy may have to respond to the claim in isolation, without the policy effected by the insured being required to respond.
Ultimately, these subtle distinctions may make all the difference as to which policy is called upon to cover the insured, and whether an insurer can take advantage of a dual insurance situation.